The word retirement may sound like something that’s too far away. It probably isn’t even among your priorities. However, now that your adult life is starting and you’re gradually taking on more responsibilities, it’s important to understand that the earlier you start thinking about your retirement, the better prepared you’ll be when the time comes.
It’s unlikely that you’ll win the lottery or receive a huge inheritance from a family member to free you from financial worries for the rest of your life. On the other hand, thinking that your Social Security income alone will allow you to cover all your expenses during retirement is being too optimistic. Social Security payments (benefits) are designed to cover only the most basic costs of living during retirement.
Even if you are just starting out at your first job, commit early on to saving a portion of your salary in a retirement plan. By doing so while you’re working, you’ll be able to plan for a financially secure future.
Focus on your financial future and save automatically
Preparing for your retirement is your responsibility and you must take control of it. The earlier you start planning, the better your chances of having a retirement in which you feel comfortable. If you haven’t given it much thought yet, don’t wait any longer and start focusing on what you’ll need when that time comes around.
As a rule of thumb, you will need between 70% to 80% of your salary as retirement income to be able to have a reasonably comfortable life during that stage. To reach that goal, take a portion of your paycheck and contribute it to a retirement plan for as long as you are employed.
Making automatic paycheck contributions to a retirement savings plan helps simplify your life because you won’t have to worry about transferring funds. Also, it will help you not to overspend money. In addition, you won’t have to worry about looking where to invest each time you contribute to the plan. Your plan contributions are automatically invested in the options provided by the investment portfolio of your choice.
Make saving a habit
As you watch your retirement savings accumulate over time, you may be motivated to save even more. It may become second nature to find ways to reduce your spending and set aside more money for this stage of life. And whenever you receive a pay raise or a bonus, consider automatically saving a portion of it as well.
|Growing your retirement account|
|You could save this amount after:|
|If you increase your plan contributions by:||5 years||10 years||20 years||40 years|
|$10 per week||$3,023||$7,101||$20,020||$86,291|
|$15 per week||$4,535||$10,652||$30,033||$129,447|
This is a hypothetical example used for illustrative purposes only. It assumes amounts are invested monthly, an average annual total return of 6%, and monthly compounding. It does not represent the results of any particular investment. Your results will be different. Amounts are rounded to the nearest dollar. Source: DST Retirement Solutions, LLC, an SS&C company.
Learn more about retirement strategies from our experts
Watch the following videos to learn more on how to manage a retirement account:
View full playlist here.
For more information about the different retirement strategies available to you, please send an email to our financial expert at email@example.com. Remember, the earlier you start planning, the better your retirement financial security will be.
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